Higher public debt helped slow build-up of household debt: Bank of Canada

The governor of the Bank of Canada said today the federal government's steps in the last couple of years to take on more public debt has helped prevent an even faster build-up of household debt that has still managed to climb to historic highs.
Bank of Canada Governor Stephen Poloz says Ottawa's accumulation of public debt may be restraining the growth of private debt. THE CANADIAN PRESS/Chris Young (THE CANADIAN PRESS)

The governor of the Bank of Canada said today the federal government's steps in the last couple of years to take on more public debt has helped prevent an even faster build-up of household debt that has still managed to climb to historic highs.

Stephen Poloz said Ottawa's recent spending on programs, such as enhanced child benefits and infrastructure, have lifted the economy and pushed interest rates to a level higher than they would have been without government stimulus.

He said the higher rates have helped keep the accumulation of household debt lower than it otherwise would have been had Canada continued with government belt-tightening approaches of the past.

Poloz made the comments Tuesday as he responded to questions following a speech at Queen's University in Kingston, Ont.

His remarks came a couple of weeks after the Trudeau government tabled a federal budget that has faced criticism for its plan to continue running annual multibillion-dollar deficits across the five-year projection horizon — despite the country's surprisingly strong economic performance.

In response to a journalist's question, the governor said he agrees with the view consumers are facing high debtloads today because they filled in the debt-accumulation void left when governments turned to austerity by shutting down stimulus measures to address fallout from the 2008 financial crisis.

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